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Data: New York Fed; Chart: Axios Visuals

The New York Fed's latest survey of consumers shows that average Americans are joining investors in boosting their expectations for inflation, with consumers' one-year inflation expectations rising to the highest level since July 2014.

Why it matters: Inflation is largely controlled by inflation expectations. If individuals expect costs to rise they will generally demand higher pay, landlords will raise rents and businesses will increase the cost of goods and services, pushing inflation higher.

Flashback: Fed chair Jerome Powell last week said he didn't expect prices to increase to the point “where they would move inflation expectations materially above 2%.”

  • But the data show consumers clearly see inflation rising materially above 2% over both a one-year and three-year time horizon (the survey found consumers' three-year inflation expectations were 3%, unchanged from January).
  • Investors also expect inflation to move well above 2%, as evidenced by the levels of 5-year, 10-year and 30-year breakeven inflation rates all currently above 2%.

Details: The biggest factors in the increased inflation expectations were median expectations for rent and gas prices, which jumped to 9% for the cost of rent from 6.4% in January and to 9.6% for gas from 6.2% the previous month.

Don't sleep: “To be sure, if bond yields continue to rise and there is a smooth rotation out of growth and defensive stocks into value and cyclical stocks, the Fed will remain sanguine,” Société Générale strategist Albert Edwards told clients in a note last month.

  • “But the risk is growing that with so many bubbles blown by the Fed something will burst soon.”
Consumers' expectations for jobs and their finances are in a rut
Data: New York Fed; Chart: Axios Visuals

U.S. consumers are not expecting much growth in their own household income — expectations decreased from January and are below their February 2020 level, the New York Fed's survey also shows.

What happened: Expectations for household income growth declined for the first time since October last month, showing a renewed lack of confidence.

  • The number is well below February 2020's 2.7% growth expectation when one-year ahead inflation expectations were 2.5%.

Expectations for finding a job also are falling, with the mean perceived probability of securing new employment after losing a job falling to 48.8% in February from 49.5% in January.

  • While above its recent low of 46.2% in December, the number remains well below the February 2020 level of 58.7%.

The big picture: The Fed's survey suggests that Americans are expecting inflation to materially rise while their own financial situations lag behind.

Go deeper

Federal judge says Florida ban on "sanctuary cities" racially motivated

Florida Gov. Ron DeSantis. Photo: Joe Raedle/Getty Images

A federal judge on Tuesday struck down parts of a Florida law aimed at banning local governments from establishing "sanctuary city" policies, arguing in part that the law is racially motivated and that it has the support of hate groups.

Why it matters: In a 110-page ruling issued Tuesday, U.S. District Judge Beth Bloom said the law — signed and championed by Gov. Ron DeSantis (R) — violates the Constitution's Equal Protection Clause because it was adopted with discriminatory motives.

Biden steps into the breach

Sen. Joe Manchin heads to a meeting with President Biden today. Photo: Kevin Dietsch/Getty Images

President Biden ramped up the pressure on his fellow Democrats Wednesday, calling a series of lawmakers to the White House in the hope of ending infighting and getting them in line.

Why it matters: Divisions within the party are threatening to derail Biden's top priorities. After several weeks of letting negotiations play out, the president is finally asserting his power to ensure his own party doesn't block his agenda.

1 hour ago - Politics & Policy

Scoop: Dems seek new green deal

Rep. Stephanie Murphy. Photo: Chip Somodevilla/Getty Images/Bloomberg via Getty Images

House Democrats discussed with President Biden on Wednesday a plan to exempt billions of dollars of new climate spending from his requirement that his $3.5 trillion "soft" infrastructure plan be offset with additional revenue.

Why it matters: The accounting proposal — a version of "dynamic scoring" — would dramatically lower the amount of taxes Democrats would need to raise while creating wiggle room to increase the ultimate size of the package.